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Poland Reform Failure in the 1980s
By 1980 it had become clear that the large-scale import
of
capital and technology from the West could not substitute
for
economic reform. On the contrary, systemic reforms were
needed to
ensure satisfactory absorption and diffusion of imported
technology. Significant expansion of profitable exports to
the
world markets was impossible for an inflexible and overly
centralized economic system. On the other hand, without an
increase in exports, reducing or even servicing Poland's
rapidly
increasing international debt was extremely difficult.
Meanwhile, the enormous investment drive of the early
1970s
had destabilized the economy and developed strong
inflationary
pressure. Rates of NMP growth dropped throughout the
second half
of the decade, and the first absolute decline took place
in 1979.
Although planners should have been adjusting the level of
aggregate demand to the declining aggregate supply, they
found
this task politically and administratively difficult. The
authorities also feared major price revisions, especially
after
workers' riots forced withdrawal of a revision introduced
in
1976. In the late 1970s, some prices were increased
gradually
whereas other increases were concealed by designating them
for
new, higher quality, or luxury items. The rest of the
inflationary gap was suppressed by fixing prices
administratively.
By the late 1970s, the shortage of consumer goods was
acute.
Nominal income increases continued as a "money illusion"
to
minimize social discontent and provide a work incentive.
This
strategy increased the "inflationary overhang," the
accumulated
and unusable purchasing power in the hands of the
population. At
the same time, suppressed inflation spurred maladjustments
and
inequities in the production processes, further reducing
the
supply of goods. The deteriorating situation in the
consumer
goods market resulted in a series of watershed events: a
wave of
strikes that led to the formation of the Solidarity union
in
August 1980, a third enforced change in the communist
leadership
in September 1980, and the imposition of martial law in
December
1981.
Between 1978 and 1982, the NMP of Poland declined by 24
percent, and industrial production declined by 13.4
percent. The
decline in production was followed by prolonged
stagnation.
Recognizing a strong grass-roots resistance to the
existing
system, the new government of Stanislaw Kania, who had
replaced
Edward Gierek, established the Commission for Economic
Reform in
late 1980. This body presented a weakened version of
drastic
reforms recommended by the independent Polish Economic
Society,
an advisory board of economists formed earlier in 1980.
Implemented hastily in mid-1981, the reforms nominally
removed
the PZPR from day-to-day economic management and gave the
enterprises responsibility for their own financial
condition and
for planning. These decentralizing reforms were distorted
by the
constraints of martial law that had been imposed
nationally in
December 1981, however, and they failed to improve the
economic
situation
(see The Jaruzelski Interlude
, ch. 1).
Internally
inconsistent and insufficiently far-reaching, the reforms
reduced
central administrative control without establishing any of
the
fundamentals of an alternative market system. Thus, in
effect,
the economy operated from 1981 to 1989 in a systemic
vacuum.
After 1985 the foreign trade situation further
complicated
Poland's economic crisis. The relative importance of
Comecon
trade declined yearly, necessitating expanded trade with
the
West, particularly the European Community
(EC--see Glossary).
This shift was a policy change for which neither the
communist
regime nor the economic system was prepared in the late
1980s.
Data as of October 1992
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